Boothe v. Bennett

• Citation: 249 Or. 31,436 P.2d 746
• Parties: Ferris F. BOOTHE, Appellant, v. E. Lee BENNETT, Defendant, and Jack M. Noce, Respondent.
• Decision Date: 24 January 1968
• Court: Supreme Court of Oregon

Page 746

436 P.2d 746

249 Or. 31

Ferris F. BOOTHE, Appellant, v. E. Lee BENNETT, Defendant and Jack M. Noce, Respondent.

Supreme Court of Oregon, Department 2.

Argued and Submitted Jan. 5, 1968.

Decided Jan. 24, 1968.

Glen McCarty, Portland, argued the cause and filed a brief for appellant.

Gerald J. Meindl, Portland, argued the cause and filed a brief for respondent.

Before PERRY, C.J., and McALLISTER, SLOAN, GOODWIN and HOLMAN, JJ.

GOODWIN, Justice.

This appeal involves the application of ORS 41.530, which provides in substance that no evidence, except in writing, is admissible to charge a person upon a representation as to the credit, skill, or character of a third person.

In March, 1964, the defendant Bennett asked the plaintiff to guarantee a bank loan to Bennett in the amount of $10,000. The previous November, Bennett had borrowed $5,800 from the defendant Noce, who was his accountant. On March 12, 1964, $2,011.67 of this debt remained unpaid. A few days before March 12, Bennett had represented to the plaintiff that he needed $10,000 temporarily to carry the inventory for his business, and that the reason he was short of capital was that he had recently repaid the $5,800 which he owed Noce. Plaintiff thereupon, so he testified, telephoned Noce and asked whether or not Bennett had repaid the $5,800 which he had borrowed. Noce (according to the plaintiff's offer of proof) replied that Bennett had repaid him in full upon request. It later developed that, at the time of the call, Bennett had not repaid Noce in full. Bennett did, however, pay Noce in full on March 13, after the bank approved the loan which plaintiff had guaranteed. On March 13, the loan proceeds were deposited to Bennett's checking account (in the Head Office of the United States National Bank), Bennett drew his check in favor of Noce, and Noce carried the check to his bank (the Stadium Branch of the United States National Bank) and deposited it. On the same day, Bennett's checking account at the Head Office was charged with the check to Noce. The record contains no explanation of the expeditious handling of these transactions. In any event, Bennett soon took bankruptcy, and the plaintiff was damnified.

Alleging that the foregoing facts amounted to a fraudulent conspiracy, plaintiff brought this action against both Bennett and Noce. Plaintiff recovered judgment against Bennett and appeals from a judgment exonerating Noce. From the abbreviated record before us, we cannot tell whether Bennett testified. The case against Noce collapsed when the trial court rejected the plaintiff's testimony of his version of the alleged telephone call. Plaintiff assigns error to that ruling.

The question thus is whether a plaintiff in a case of this kind is absolutely barred by ORS 41.530 or whether he can, by alleging fraud, and by producing other evidence of fraud, make admissible his own oral testimony to prove the defendant's part in the fraud.

Lord Tenterden's Act, 9 Geo. 4, ch. 14, § 6 (1828), upon which ORS 41.530 was patterned, was adopted to curtail the use of tort actions to evade the English Statute of Frauds, which in contract actions precluded relief for breach of an oral promise to answer for the debt of another. In an action upon the case for deceit, a plaintiff had been allowed to prove by oral testimony that the defendant had falsely represented to the plaintiff the virtue of a subsequently defaulting debtor as a credit risk. Pasley v. Freeman, 3 T.R. 51, 100 Eng.Reprint 450 (KB 1789). Thirteen of the American states eventually followed with their own versions of the statute. See Annotation, 32 A.L.R.2d 753 (1953); and Comment, 22 Cal.L.Rev. 358 (1934).

The supposed evil against which the statute was directed was a swearing contest which a plaintiff who had nothing further to lose but his court costs could win if he could persuade the jury to believe his version of the story. See opinion of Grose, J., in Pasley v. Freeman, 100 Eng.Reprint at 451.

The American jurisdictions that have considered the statute in fraud cases can be divided into two general groups: those that exclude the oral evidence of the conversation in all cases; and those that receive the oral evidence when it tends to prove fraud or conspiracy on the defendant's part. The cases, which fall into several subdivisions, are compared and discussed in the Annotation, 32 A.L.R.2d supra. One important subdivision is made up of cases in which the defendant received a direct pecuniary benefit from his allegedly false representation. In some courts this fact is relied upon to justify an exception to the statute. Wuerth v. Stivers, 273 Mich. 276, 262 N.W. 908 (1935).

The direct-benefit exception is related to the 'leading object' or 'main purpose' exception to the Statute of Frauds. If the main purpose of the promisor is to serve some interest of his own, then his oral promise is enforceable in a contract action notwithstanding the fact that the enforcement operates to discharge the debt of another. See Summers, Contracts- --1960 Oregon Survey, 40 Or.L.Rev. 202, 208 (1961); 2 Corbin, Contracts § 369 (1952). The 'leading object' exception is recognized in Oregon. Columbia Brick Works v. Freeman et ux., 223 Or. 109, 353 P.2d 620 (1960); Umpqua Valley Bank of Roseburg v. Wilson, 120 Or. 396, 252 P. 563 (1927), noted in 6 Or.L.Rev. 281 (1927); Ludwick v. Watson, & Or. 256 (1870).

The trustworthiness of the proffered testimony about the alleged oral statements is substantially enhanced when corroboration is available from other evidence to prove that the statements were part of a fraudulent scheme. See Haslock v. Fergusson, 7 Ad.&E. 86, 112 Eng.Reprint 403 (KB 1837). A statute designed to prevent fraud ought not to be allowed to shield it. Therefore, where the defendant benefits from the fraud and where evidence other than the alleged oral statement corroborates the existence of a fraudulent scheme, it is reasonable that the oral statement itself should be admitted.

Elsewhere in the law we find that testimony of a certain type must be corroborated before it can serve as the basis for a criminal conviction. See, e.g., ORS...